Fugitive from 22 fraud counts arrested after 3 years on the lam

After three years on the run, Joe Shambaugh is finally facing a federal indictment that alleges he defrauded donors to three Orange County charities.

Shambaugh, 53, was arrested Thursday at his mother's home in Apple Valley, Assistant U.S. Attorney Gregory Staples said. He is being held without bail at Santa Ana City Jail.

A convicted felon, he founded and ran the Santa Ana-based American Veterans Relief Foundation, the Association for Disabled Firefighters and the Coalition of Police and Sheriffs.

The indictment charges that the three groups raised $9.8 million from 2001 through 2004, but spent just $85,000 on good works. Phone solicitors, using scripts written by Shambaugh, are alleged to have told donors their money would go to programs aiding veterans, police, firefighters and burn victims - programs that did not actually exist.

The three groups and another Shambaugh-led group, the Disabled Firefighters Fund, were subjects of a 2006 Orange County Register investigation. The Association for Disabled Firefighters shut down in mid 2005. The three remaining groups shut down last May to settle a Federal Trade Commission lawsuit charging them with misleading donors. California Attorney General Jerry Brown sued the charities and their officers last June.

By then Shambaugh was long gone. He left the charities in June 2005 as the federal investigation was heating up. He disappeared in February 2006 right after his indictment on 22 counts of mail fraud and money laundering.

"He indicated that he had been in Mexico for three years under an alias," Staples said.

Shambaugh is scheduled for arraignment Aug. 31 in Santa Ana.

Shambaugh had an unusual background for a charity founder. A failed lawyer and businessman, he served six years in federal prison for trying to arrange the murder-by-hire of a business partner and his own father.

Shambaugh found a new career after prison as "legal liaison" to Orange County telemarketing king Mitch Gold. When Gold went to prison for charity fraud in 2001, Shambaugh picked up the pieces.

Gold had made millions by signing up financially shaky charities to one-sided fundraising contracts. After paying Gold, his clients typically got just 15 cents of every donated dollar.

Shambaugh found a subtler, more lucrative angle. His charities signed management contracts with his company, masking his role from regulators and the public. After paying Shambaugh and the telemarketers he hired, his charities got about a penny on the dollar.